INTRODUCTION TO SERIOUS FRAUD.
What Is Concealed Asset Recovery?
As the term implies, 'concealed asset recovery' involves the recovery of wealth from a dishonest obligor – where such wealth has been laundered, camouflaged or hidden. This simple explanation, however, belies the complexity which accompanies the process. It is a difficult and time-consuming activity. It requires detailed planning, the concentrated labour of a group of people who represent a multitude of disciplines, co-ordination and management. The term encompasses not only the end goal, the actual recovery, but all stages from discovery through recovery. Once the fact of missing money has been uncovered a myriad of questions swirl around, often clouding the ability to think clearly and prioritise. A successful asset recovery process must be based on a sequential, logical analysis of what has transpired, an indexing and grading of leads, a calculation of what value has been taken, and the formulation of a model designed to maximise ultimate recovery.
Any effective civil recovery model involving a dishonest obligor and substantial value requires the employment of a serious, professional recovery team which is comprised of an appropriate blend of forensic accountants, investigators, multi-jurisdictional pre-emptive remedy lawyers, information technology experts and fraud experts. These people must have an in-depth understanding of the experienced fraudster, her traits, her modus operandi and, ideally, her weaknesses.
The recovery of concealed assets involves the need to manage risk. The process requires the investment of substantial financial and human capital. The risk is a function of the degree of complexity of concealment and how many layers of legal relationships and jurisdictions are interposed between the corpus of value taken and the corpus concealed. The cost of recovery is not a function of the measure of the value of the obligation sought to be enforced. The cost of pursuing a $10 million claim can be the same as a $100 million one. In general, as more capital is spent on the process, the risk associated with a complete failure to recover declines. Thus, with each step, there is greater access to objective fact with which to justify the cost of moving forward to the next step. The process of mitigating the risk of a total failure to recover is thus incremental.
The five cornerstones to a well-constructed asset protection fortress include the following components:
- Trust
- Company
- Structuring
- Multi-jurisdictional nature
- Protection of 'Confidential'
Information
These are all legal concepts. Many jurisdictions seek to superimpose seemingly insurmountable walls around bank, trust and company secrets – despite the fact that such barriers to information are used to flout law enforcement or to defraud creditors or victims. Abstract legal concepts and relations such as 'company,' 'contract' and 'trust' are relied upon and used by law abiding citizens and fraudsters alike – a fact which makes it all the more difficult to discern which is which and what is what. The problem is compounded exponentially by the fragmentation of events and facts across national boundaries. The limited territoriality and local nature of law is a principal strength to nomadic rogues – who are delighted by the prospect of leaving an analytically chaotic path in their wake.
Legal mechanisms used in the secretion of wealth, howsoever derived, abound. The wealth so secreted is seemingly beyond reach. While legal means may be used to protect wealth – where the motive for protection or the means of acquisition of value is illegal or male fide, that bounty is fair game.
"A wrong does not cease to be a wrong because it is cloaked in the form of law. The test of legality, then, is whether the result is lawful and the means used to achieve that result are lawful." Newman v. Dore 9 NE 2d 966, at 971; 275 NY 371, at 377 (NY S. Ct., 1937).
Concealed asset recovery will invariably involve an attack on at least one of these cornerstones. A careful deconstruction of the fortress may require a showing of a link between the assets hidden and the underlying wrong. This notion leads us to an important question, the answer to which must be understood if success in complex asset recovery is to be achieved.
Why are Assets 'Concealed' or 'Laundered'?
Assets are concealed for a variety of reasons, some apparently legitimate, many not. Regardless of the provenance of wealth, it may be said that the end goal of any asset protection device is just that – protection. More specifically, the over-arching goal is protection from being compelled to honor an obligation involving money. It is the motive behind the construction of the device which illuminates the analytical picture and casts either a clear or doubtful glow. A dishonest motive can be inferred from the circumstances. Proof of the taking of property by deceit can be used to impute an impure design in the handling and investment of assets by the obligor, after the fact. In more benign debtor–creditor relations, an intention to commit an ex post facto fraud (or one that happens after the extension of credit), can be inferred from objective indicators – or 'badges' of fraud. For instance, a debtor's dealings with assets in secrecy or with family members in exchange for inadequate consideration show much. Rarely does the victim of a fraudulent transfer have any direct, personal knowledge of the fraud – or of the motive underlying it. Thus, the law allows creditors to impute an illicit motive to an impugned debtor or transaction by inviting the Court to draw inferences from objective facts and circumstances.
A mala fide actor must conceal the fructus sceleris (the fruits of fraud) to avoid having to account for his wrongdoing. Such an actor must seek to obscure not simply the fact and location of the ill gotten gains, but also their provenance. It is thus a two stage exercise which depends for its success on the employment of an array of devices and facades to confuse, intimidate and hinder. In any successful asset recovery plan, one must take into account the fact that the primary aim of the fraudster or money launderer is the concealment of the illegal source of funds and their subsequent legitimization, with a view to realizing uninhibited access to and enjoyment of such value. However, as with all things human – any system of concealment has its weaknesses. The attribution of control of, or enjoyment over, great wealth by a rogue can itself make the notion of 'concealment' an impotent one. Moreover, a thief knows all too well not to give his plunder to another thief as a nominee or ostensible holder. Rather, dishonest obligors must rely upon jurisdictions and legal relationships where obligations are honored as a matter of course. Thus, substantial stolen value may circulate by electronic means through a bank in Belarus or Dominica. However, it will not ordinarily stay there for long. In contrast, much of it will likely be found in London, New York and other well-trodden centres of law and order (albeit with the title to the 'hidden' wealth having been parked offshore or held through a confusing array of dummy vehicles).
Fundamentally, both legitimate and illegitimate transactors have the same principal objective in the use of asset protection devices. This is represented by the material and financial protection of the self. The establishment of asset protection things (for example, an Anglo-Saxon trust, the creature of statute called company, or the Liechtenstein Anstalt), offers those who invest in such devices, honest and otherwise, the means to unshackle large tranches of capital from the boundaries of normal legal relationships with which they were hitherto involved. Thus, a bank, believing itself to enjoy the benefit of a fully performing credit facility supported by an adequately capitalised debtor, may be shocked to discover that the debtor had, at a certain moment in time, so fortified his wealth behind layers of trusts (and things) as to render meaningless his erstwhile promise to repay. The recalcitrant debtor places his wealth into a legal cocoon, with deliberation.
What Manner of Person is Involved in the Concealment of Wealth?
The concealment of assets involves and implicates a number of parties. The successful asset concealer does not work alone. He needs the assistance of others.
The primary protagonist is but the first link of a chain of parties who become involved, whether wittingly or not, in asset concealment.
Advanced plans of asset protection (called 'structuring' in the laundering trade), employ an array of trustees, nominees, men of straw, companies, jurisdictions and the like, to, in effect, act as layers of asset location and information procurement barriers. Such multi-tiered barriers are calculated to add to the complexity and the apparent confusion surrounding the disposition of the wealth sought by a particular creditor or body of victims. From strategic and tactical perspectives, underlying every scheme to protect wealth is the critical assumption that all victims and creditors have scarce financial and human resources available to seek to dismantle plans of wealth protection. If attacked in conventional or linear terms – a creditor faces a discouraging war of attrition.
In many cases, a dishonest obligor will use members of his family to conceal wealth. Transfers at undervalue, gifts, the payment of premiums to captive offshore insurance companies, and loans are all methods used to convey the impression that the wealth sought is not in fact enjoyed by the party implicated in the primary fraud, but by another, 'innocent' party – possibly innocent of the primary fraud, but not of the secondary actus reus – the acts of concealment.
The distance from the primary fraud does not necessarily exonerate the purportedly innocent tertiary holder of wealth. If tainted wealth is acquired with actual or imputable knowledge of the underlying fraud, the holder thereof can be held accountable under alternative heads of accessory liability. (See, Section 8.0 below). This is an important fact which is often overlooked by asset recovery professionals. A primary strategic principle can be stated thus – each link along the asset concealment chain must be targeted by the investigation as a possibly responsible party.
The Significance of the Problem.
The problem presented by asset concealment has serious repercussions not simply for the victims of primary fraud, but for confidence in the capital markets and the wellbeing of the world's economy. Assets concealed are assets upon which taxes are only rarely paid. Wealth concealed is effectively out of legitimate circulation. The presence of vast amounts of 'concealed' wealth in the global monetary system distorts economic reality.
The offshore world consists of approximately 62 tax havens, the majority of which attract capital principally by maintaining bank and fiduciary relation secrecy legislation and by employing a policy of low taxation on foreign deposits and business enterprises.1 Secrecy legislation purports to criminalize the dissemination of information concerning the ownership of wealth imparted to offshore banks, trust companies, lawyers or other confidants. These locales represent either a haven for, or an important element used to conceal, dubious wealth. It has been estimated that trillions of dollars of value passes through or is held in offshore accounts each year.
Although estimates of the size of the problem of international money laundering vary, and although some commentators have argued that the amounts of money involved are truly 'dark (or unknowable) numbers,' the body that sets the global standard in helping countries to combat money laundering, the Financial Action Task Force on Money Laundering ("FATF"), has said the following:
"By its very nature, money laundering occurs outside of the normal range of economic statistics. Nevertheless, as with other aspects of underground economic activity, rough estimates have been put forward to give some sense of scale of the problem.
The International Monetary Fund, for example, has stated that the aggregate size of money laundering in the world could be somewhere between two and five percent of the world's gross domestic product.
Using 1996 statistics, these percentages would indicate that money laundering ranged between US$590 billion and US$1.5 trillion. The lower figure is roughly equivalent to the value of the total [annual] output of an economy the size of Spain.
Back in 1998, it was estimated that there were some 4,000 offshore banks licensed in almost 60 offshore jurisdictions and which controlled as much as $5 trillion in assets. About 44% of the banks were located in the Caribbean and Latin America." 2
Money laundering around the globe has increased dramatically over the past few decades. There is no single estimate of the actual dollar amount involved. However, the U.S. Department of the Treasury has estimated that "$600 billion represents a conservative estimate of the amount of money laundered each year." 3 Other estimates are as high as $2.8 trillion annually. Most estimates, however, include the assumption that approximately half of all money laundering schemes involve financial institutions in the United States.4 In fiscal year 2001 alone, U.S. federal law enforcement agencies seized more than $300 million in criminal assets that were attributable to money laundering.5
In 2001, U.S. District Courts completed 1,420 money laundering cases and convicted 1,243 individuals, or more than 87% of the defendants prosecuted. Some of these cases involved more than $100 million in laundered funds, and one-fifth of the cases involved more than $1 million.6 Of the Money Laundering Control Act charges made in 2001, 63% involved fraud, bank embezzlement, the transportation of stolen property, and counterfeiting, and 16% involved drug trafficking. Almost half (44%) of the money laundering cases referred to U.S. Attorneys in 2001 occurred in the six geographic areas designated by the U.S. Departments of Justice and the Treasury as areas of high risk for financial crimes and money laundering activity (High Intensity Financial Crime Areas or HIFCAs).7
In the 1980's and '90's, the offshore world took direct and aggressive action to expand the menu of sophisticated asset protection devices available to reinforce the flow of capital which was gravitating towards jurisdictions which also offered bank secrecy, minimal reporting and low taxes. For instance, the 'offshore asset protection trust' (or the 'OAPT') became de rigueur in the leading offshore centres in the early 1990's. These are the progeny of a series of legislative enactments specifically designed to seriously degrade the law of creditor fraud which had taken hundreds of years to develop – since the Statute of Elizabeth (Fraudulent Conveyances Act 1571) (13 Eliz I Cap 5).8 One commentator has said of this:
"A plethora, if not a plague, of offshore jurisdictions has sprung up, ranging from islands large and small, venued in (Bermuda) and out (Isle of Man) of the sun; through small principalities and undeveloped nations to substantial ones. Depending on definition, one can identify 70-80 domiciles. Perhaps 10 have validity as trust domiciles. Civilised professional people have adopted jargon and 'buzz words' more fitted to the world of advertising or public relations: trust 'industry,' 'designer' and 'user-friendly' jurisdictions, 'APT,' 9and – 'state of the art legislation,' are a few examples of just how living a language can become." 10
The presence of an asset concealment device will often deter even well-capitalised victims, cognisant as they are of the considerable expense involved in recovering hidden assets. This defeatist attitude on the part of creditors is expected by their recalcitrant obligors. Ironically, therefore, one of the weaknesses of many mala fide (bad faith) transactors is that they hold firmly to the assumption that their web of deceit has served them well. They are thus exposed to a sustained, well-capitalized and secret investigation.
Today there exists meaningful hope that the day of the bandit jurisdiction being able to, without consequences, legislate to protect the wealth of ne'er-do-wells, may be short. The work of the last three years of the Organization for Economic Co-Operation and Development (the "OECD") and the Financial Action Task Force on Money Laundering (the "FATF")11 of Paris, France, in black-listing jurisdictions that do not measure-up to reasonable levels of capital market regulation or who have not enacted or do not enforce modern anti-fraud and money-laundering statutes, has been effective.12
The results achieved by the FATF appear to be laudable. Non-cooperative countries are threatened with serious counter-measures and sanctions. For instance:
"Due to Myanmar's failure to introduce comprehensive mutual legal assistance legislation prior to 3 November 2003, counter-measures have been in effect since that date. Although legislation was adopted in April 2004, it contains serious deficiencies that will need to be addressed; the FATF will consider removing counter-measures when Myanmar has established a framework for effective international judicial co-operation. The FATF welcomes Myanmar's recent enactment of implementing rules and regulations for its AML law.
Because of Nauru's failure to enact appropriate legislative measures and the existence of numerous shell banks, counter-measures have been in effect with respect to Nauru since December 2001. Although the FATF welcomes Nauru's recent efforts to eliminate shell banks, additional steps are needed to ensure that previously licensed offshore banks are no longer conducting banking activity before the FATF will consider removing counter-measures. In particular, Nauru must still amend the Corporation Amendment Act to ensure that all offshore banking licences are no longer valid." 13
On June 20, 2003, the FATF issued its revised Forty Recommendations to combat money laundering. These recommendations make up the global anti-money laundering standard.14 The major changes to the FATF's Forty Recommendations include:
- "Specifying a list of crimes that must underpin the
money laundering offence;
- The expansion of the customer due diligence process for
financial institutions;
- Enhanced measures for higher risk customers and
transactions, including correspondent banking and politically
exposed persons;
- The extension of anti-money laundering measures to
designated non-financial businesses and professions (casinos;
real estate agents; dealers of precious metals / stones;
accountants; lawyers, notaries and independent legal
professions; trust and company service providers);
- The inclusion of key institutional measures, notably
regarding international co-operation;
- The improvement of transparency requirements through
adequate and timely information of the beneficial ownership
of legal persons such as companies, or arrangements such as
trusts;
- The extension of many anti-money laundering requirements
to cover terrorist financing; and
- The prohibition of shell banks."15
In addition to having publicly recognized the FATF's Forty Recommendations as the international standard for combating money laundering and terrorist financing, in October 2002, both the International Monetary Fund ("IMF") and the World Bank formally added them to their list of standards for which Reports On The Observance Of Standards and Codes ("ROSCs") are prepared:
"In October 2002, the IMF, the World Bank and the FATF agreed a common methodology to assess compliance with the FATF Recommendations. This methodology has now been used both for FATF mutual evaluations and IMF / World Bank assessments. To assist the [IMF] and [World Bank] in their work, experts from FATF [member countries] or FATF-style regional bodies, have been made available for IMF / World Bank-led assessments." 16
Notwithstanding the notable accomplishments of the FATF, there remain a number of fundamental problems with its approach. Firstly, the principal cornerstone to the FATF's work is to coerce jurisdictions with diverse cultures and legal systems to, almost overnight, introduce an array of complex legislative initiatives – all under the label of "combating money laundering." Since 9/11, this label has now been expanded to include – "the fight against the finance of international terrorism." However, when one sifts through and identifies the core elements of this approach – it is not difficult to detect where the major weaknesses and problems lie. Bankers, lawyers, trust managers and others who handle money or information concerning assets are to be compelled, by the criminal law, to report to a local regulator the fact of a "suspicious transaction." The sophisticated and thinking criminal is well-acquainted with what is defined as "suspicious", and what is not.
The principal reason for the success of the most virulent and successful money laundering typologies is the fact that they are purpose-built to be camouflaged as ordinary or non-suspicious commercial transactions. In addition, the second major pillar to the FATF's initiative is to coerce states to enact and enforce laws that require extensive due diligence to be undertaken when a bank account is established, a company is formed or a trust is settled. The golden rule is "know your customer." This requires bankers and professionals to procure objective evidence of the identity of the true beneficial owners of newly-established repositories of wealth. There are two significant problems with this principle. Firstly, a dishonest and well-capitalized obligor can easily introduce a dummy beneficiary into the frame, to be the 'pretend' owner of the proposed bank account, company or trust to be formed or established. Secondly, parties who facilitate the establishment of new bank accounts, companies or trusts also serve to assist in their maintenance – throughout the duration of their legal lives. However, the rules and standards governing anti-money laundering compliance do not send the message that once a thorough exercise in due diligence has been completed in order to permit the establishment of new client facilities – everyone – both the regulator and the regulated – can relax. Far fewer questions are asked of pre-existing or 'aged' clients or of their banking or asset-holding facilities.
In short, the new global standard of combating money laundering established by the FATF is a meritorious project. However, it has significant limitations. Essentially, dishonest obligors who are rich will continue to ply their trade – albeit at a greater economic cost made necessary by the enhanced regulatory framework now afoot.
An equally important flaw in the approach of the FATF is that it completely ignores the need to develop measures to coerce offshore jurisdictions to roll-back laws which have seriously degraded the law of creditor fraud – a species of fraud that seems to be looked upon in more benign terms by the world's regulatory community. Thus, by way of example, the Cook Islands, which continue to be 'black-listed' by the FATF, are apparently making a concerted effort to fall into line and comply with the new international standards to fight money laundering. However, the Cook Islands have one of the most extremely pro-debtor and anti-creditor statutes in the world in their International Trust Act (1984) (See, Footnote 3 above for a description of problematic aspects of this statute). Nothing that the FATF is proposing to do seeks to force-on the elimination of this unsatisfactory statute.
Traditional Methods of Recovery – A Flawed Approach.
In the face of serious forms of deceit and the best advice that money can buy to hide the fructus sceleris, traditional methods of recovery are decidedly ineffectual, tied as they are to a conventional, straight-line or linear attempt at recovery. Dishonest obligors both anticipate and gear their asset concealment conduct, to defeat the widely-used and predictable methods of claim enforcement employed by creditors.
For instance, the vast majority of creditors, when faced with a major default, hire a local lawyer to 'get a judgment.' The ensuing civil action plods along – making its course through the exchange of pleadings, discovery, and possibly a trial. The creditor honors the Marquess of Queensbury's rules of deportment, while the dishonest debtor does not. The debtor causes delay and obfuscation in the proceedings – and uses the time to further camouflage his assets. A judgment is secured. The creditor may have spent several hundred thousand dollars on legal fees to get judgment. The debtor's assets are now heavily fortified. A local investigator is asked to 'locate' 17 the debtor's assets for 'not a penny more than $10,000' – as the creditor is tired of 'throwing good money after bad.' A report based principally on domestic database searches is issued by the investigator. It raises many more questions than answers. No assets in the name of the debtor can be located. The creditor is left frustrated, staring into the abyss.
A dishonest obligor cannot be defeated in a meaningful way, if viewed externally. Attempts to procure recovery through the criminal justice system are rarely successful. The machinery of the criminal justice system, tied as it is to discrete, singular jurisdictions, and limited in terms of economic and human resources, is not geared to collate, analyze and take action upon the disparate elements of an asset concealment fortress, spread as they frequently are the world over.
Typically, the institutional victim of deceit first travels to the scene of the crime. Its professional advisors examine the primary evidence to measure the extent of the damage done, and to begin to understand what happened. Professionals who act for the victim offer recommendations intended to mitigate the risk of a similar fraud being perpetrated in the future. What next?
In some cases, claims are made on fidelity bond insurance policies, if the loss be at least partially referable to a dishonest act of an employee for gain. But the preponderance of serious fraud cases are perpetrated by persons external to the institution. Civil proceedings brought to recover money are prosecuted without the benefit of critical offshore (and onshore) asset obscuring information.18
After examining the primary evidence, the victim usually looks at the trail – or the droppings of the fraudster, to see what can be done against him or, more accurately, his puppets (i.e., the front-line contracting companies, trusts and nominees used to take value by deceit). The police are called. Nothing is achieved from that, if viewed with reference to the primary goal of the criminal process — justice — in contrast to the recovery of the fructus sceleris. The victim then looks into the distance. It sees only the difficulties in getting at the hidden wealth taken from it.
What happens next? The victim occasionally attempts to follow him. However, the victim will invariably travel on the very path which the fraudster has laid to obfuscate, confuse and discourage.
To recover misappropriated value, we must invert the fraud paradigm. If the dishonest obligor's greatest strength is our insularity and myopia, we must invert the norm.
The challenge lies in our characterization of the problem, articulation of the issues and resolution of an appropriate strategy to respond to idiosyncratic, unorthodox conduct — the province of international economic criminals. Our professional responsibility is to overcome institutional angst deriving from the protagonist's scorching and the victim's predisposition toward retreat to the conventional.
Conventional, myopic, devoid of critical analysis – these words and phrases both define the traditional approach towards recovery and explain its ineffectiveness. In a world where knowledge evolves on a real-time basis, any process depends for its success upon an ability to grasp at and comprehend new ideas and trends. The same principle applies to concealed asset recovery. The experienced and insightful white collar criminal has much at his disposal. A plan of recovery must be developed to move laterally around his strengths. Concealed asset recovery can and should be as simple as the term suggests – provided the correct approach is adopted and followed.
Footnotes
* Martin S. Kenney, B.A., LL.B., LL.M. (International Business Law) is the managing partner of Martin Kenney & Co., Solicitors, Preferred Area of Practice: International Fraud. Mr. Kenney is a Practising Solicitor-Advocate of the Supreme Court of Judicature of England & Wales; a Practising Solicitor-Advocate of the Eastern Caribbean Supreme Court at the British Virgin Islands; a Barrister & Solicitor of the Supreme Court of British Columbia, and a Licensed New York Foreign Legal Consultant. Elizabeth O'Brien, B.L., is an Irish and English Barrister-at-Law and a New York Attorney at Law.
1. There is irony with respect to this observation and the United States of America – a jurisdiction that is not normally thought of as being an international fraudster's haven. One of the principal methods of secreting wealth is through companies domiciled in jurisdictions which do not require annual audits of privately held corporations' financial statements and which permit the non-transparent, subjective registration of ownership of shares by purely private means. One of the worst offenders of this are modern business corporation statutes in the United States which do not require the public and transparent registration of share-ownership, or the preparation and filing of annual audited financial statements, of privately-held corporations. Evidence of ownership of shares of a privately-held Nevada company can, for instance, be 'made-up' at a cost of $100 for a new booklet of share certificates and a new $2 blank share registry. Yesterday's share ownership records can be disposed of in a shredder and replaced by a whole 'new' set of subjectively concocted ones. Added to this is the notion that the United States itself is a major tax haven, albeit one that is limited in scope (given the policy of the United States not to impose a tax on income earned on deposits held in U.S. venued banks by non-U.S. persons). However, the most surprising phenomenon can be found in the infamous debtor protection rules, such as the homestead exemption from execution in States such as Texas and Florida. In Florida, the State Constitution dictates the terms of this protective device (Art. X, §4, Florida Constitution). It is so extreme that a debtor can fraudulently transfer assets into his homestead without fear of having such value disgorged (See, Havoco of America Limited v. Elmer C. Hill 790 So. 2d 1018 (Fla 2001)). Moreover, there exists the bizarre extension, in a number of States (i.e., Florida and Pennsylvania), of the 12th Century English land law concept of a tenancy-by-the-entireties (where each member of a spousal relation is presumed to own the entirety of a jointly-held estate in land), to all forms of personal property – such as bank deposits, valuable art work and investment securities. Thus, enormous sums of personal wealth can be held by a debtor in the joint names of husband and wife, and his creditors have no recourse to the same (unless a showing can be made that the tenancy by the entireties was the beneficiary of a fraudulent conveyance).
2. See, <www.oecd.org/fatf/NCCT/_en.htm >
3. See, < http://www.treas.gov/offices/enforcement/publications/ml2002.pdf >.
4. Federal Bureau of Investigation, Money Laundering, FBI Law Enforcement Bulletin (2002), from <http://www2.fbi.gov/publications/leb/2004/aug04leb.pdf >. A more recent bulletin was published this year and can be downloaded
5. See, Footnote 4 supra for a more recent publication of the National Money Laundering Strategy of the U.S. Department of the Treasury, The Terrorism & Financial Intelligence (TFI) Office. (The 2003 national money laundering strategy can be downloaded from < http://www.treas.gov/offices/enforcement/publications/ml2003.pdf >).
6. Bureau of Justice Statistics (July 17, 2003). [Press release – "Over 18,000 charged with Federal money laundering from 1994-2001."]. U.S. Department of Justice. <http://www.ojp.usdoj.gov/bjs/pub/press/mlo01pr.htm >.
7. See, footnote 7, supra.
8. Sophisticated debtors are drawn to settle trusts, establish companies and place value in jurisdictions such as the Cook Islands, Nevis and the Cayman Islands due, inter alia, to the above mentioned legislative degrading of the law of trusts, fraudulent transfers, the principles of the conflict of laws governing choice of law in the settlement of trusts and the statute of limitations affecting the right of a creditor to seek the avoidance of a conveyance of value into a trust. For instance, the provisions of the International Trust Act (1984) of the Cook Islands seriously affected the law of fraud on creditors in that jurisdiction. The International Trust Act provides, under section 13 (B), that an international trust settled in the Cook Islands will only be available to satisfy a creditor's claim where it is "proven beyond reasonable doubt by a creditor that an international trust was settled or established, or property disposed of to an international trust, with the principal intention to defraud that creditor of the settlor at the time of such settlement." Moreover, subsection 3 provides that, even if a creditor were able to establish beyond a reasonable doubt the actual intention to defraud, such settlement shall "not be deemed to have been established for such purpose if the settlement was established after the expiration of two years from the date of when the creditor's cause of action accrued where the creditor failed to commence proceedings." Moreover, the legislation in the Cook Islands removes the possibility of any remedy being pursued by a creditor against third party facilitators of a fraudulent transfer (under, for example, the wrongs styled as knowing receipt of trust property, breach of a constructive trust, conspiracy and breach of fiduciary duty).
9. The acronym 'APT' stands for 'Asset Protection Trusts.'
10. See Miller, R., "Offshore Trusts – Trends Towards 2000, "Vol 1, No 2, Trusts & Trustees and International Asset Management, December/January 1995, p 7.
11. The FATF was established in Paris, France in 1989 by the then Group of Seven (referring to the group of 7 nations which have the 7 largest economies in the world), to, in part, help lead an international effort to combat global economic crime and money laundering. In June 2000, the FATF issued its first 'black-list' of some 15 jurisdictions as "non-cooperative in the global fight against money laundering." These 15 jurisdictions were the Bahamas, the Cayman Islands, the Cook Islands, Dominica, Israel, Lebanon, Liechtenstein, the Marshall Islands, Nauru, Niue, Panama, the Philippines, Russia, St. Kitts and Nevis, and St. Vincent and the Grenadines. The FATF strongly urged the 'black-listed' jurisdictions to adopt measures to improve their rules and practices as expeditiously as possible in order to remedy the deficiencies identified in respect of their counter-money laundering initiatives (failing which – counter-measures or sanctions were to be issued). The FATF recommended that financial institutions should give special attention to business relations and transactions with persons, including companies and financial institutions, from the "non-cooperative countries and territories". Some 25 criteria are used by the FATF to 'black-list' a country as being 'non-cooperative.' Included among these 25 criteria is what the FATF has described as excessive secrecy provisions regarding financial institutions, whereby:
Countries and territories offering broad banking secrecy have proliferated in recent years. The rules for professional secrecy, like banking secrecy, can be based on valid grounds, i.e., the need to protect privacy and business secrets from commercial rivals and other potentially interested economic players. However... these rules should nevertheless not be permitted to pre-empt the supervisory responsibilities and fight against money laundering. Countries and jurisdictions with secrecy provisions must allow for them to be lifted in order to co-operate in efforts (foreign and domestic) to combat money laundering. (See, page 18, Review to Identify Non-Cooperative Countries or Territories of the Financial Action Task Force on Money Laundering, June 22, 2001).
Each June, the FATF issues its Annual Review of progress made in the prior 12 month period by 'black-listed' countries, and others, to undertake measures to fall into compliance with the FATF's standards for combating money laundering. On July 2, 2004, the FATF issued its most recent Annual Review, indicating that only 6 of the original 15 'black-listed' countries continue to be deemed non-cooperative in the fight against money laundering – and therefore continue to be 'black-listed.' These countries are the Cook Islands; Indonesia; Myanmar; Nauru; Nigeria; and the Philippines. (See, the FATF's Annual Review of Non-Cooperative Countries and Territories, July 2, 2004, <www.oecd.org/fatf/NCCT/_en.htm >).
12. Changing the attitudes of some judges to become more aware of and sensitive to the plight of the victim is perhaps a longer-term project.
13. See, the FATF's Annual Review of Territories, July 2, 2004, at p.1, www.oecd.org/fatf/NCCT_en.htm >.
14. See, page 1, Press Release, the FATF, Berlin, 20 June, 2003 <www.oecd.org/fatf/NCCT_en.htm >.
15. Id, page 1.
16. Id, pages 2 and 3. The FATF is an independent international body whose Secretariat is housed at the offices of the OECD in Paris. The 32 member countries and governments of the FATF are: Argentina; Australia; Austria; Belgium; Brazil; Canada; Denmark; Finland; France; Germany; Greece; Hong Kong; China; Iceland; Ireland; Italy; Japan; Luxembourg; Mexico; the Kingdom of the Netherlands; New Zealand; Norway; Portugal; the Russian Federation; Singapore; South Africa; Spain; Sweden; Switzerland; Turkey; the United Kingdom and the United States. Two international organisations are also members of the FATF – namely: the European Commission and the Gulf Cooperation Council. See, <www.oecd.org/fatf/NCCT_en.htm >.
17. The use of the verb 'to locate' in defining what must be done in respect of the recovery of concealed assets is wrong. To merely locate an asset in a fraud case is of very little assistance. The hardest part of the work lies in attributing such wealth to the obligor or to his wrong with substantial and competent evidence, and to do so before the debtor has had an opportunity to further transfer or conceal the asset thus 'located,' so that such asset might be provisionally frozen or preserved by a Court pending the final outcome of the debate over who owns what.
18. In a 1994 study on fraud, which was completed by KPMG Peat Marwick, it was noted that in only 12% of serious commercial fraud cases, do financial institutions commence civil proceedings in an attempt to effect a recovery. It is believed that only a very small fraction of these civil proceedings are successful, if success be defined by the recovery of money.
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